Le Bon, Herman CHPT 1

Key Account Management
Key Account Management

Strategies to Leverage Information,
Technology, and Relationships to
Deliver Value to Large Customers
Jol Le Bon, PhD
Carl A. Herman, MBA
Key Account Management: Strategies to Leverage Information,

Technology, and Relationships to Deliver Value to Large Customers
Copyright Business Expert Press, LLC, 2015
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
meanselectronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.
First published in 2015 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-174-9 (paperback)
ISBN-13: 978-1-63157-175-6 (e-book)
Business Expert Press Selling and Sales Force Management Collection
Collection ISSN: 2163-9515 (print)
Collection ISSN: 2163-9582 (electronic)
Cover and interior design by S4Carlisle Publishing Services
Private Ltd., Chennai, India
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
To my wife Caroline and our globetrotters

Clment, Valentine, and Mathilde
To my sister Isabelle
who initiates key projects with governments for the less fortunate
JLB
To Randi and our eight progeny
To Jol who believed we could do this
CAH
Abstract
Now more than ever, companies are faced with a critical and challenging
truth. Todays customer is demanding more attention, superior service,
and the expertise of a dedicated sales team. Suppliers must make difficult
choices to determine how to allocate limited resources, including which
customers receive the highest level of service. Increasingly, supply side organizations are working to design and implement key account programs
to meet or exceed these expectations. Key account management is a specific business strategy that involves complex sales processes, large-scale
negotiations, and the alignment of multiple internal and external stakeholders. This multi-pronged process is anything but straightforward, and
the business world is filled with examples of key account programs that
have not achieved the expected results. This book addresses the strategic
challenges facing top executives and sales leaders as they build strategies
to better manage their key accounts.
Through a new approach to the selling center and the buying center
concepts, the text offers sound, experiential solutions to better manage
large customers, resulting in co-creating value for both the supplier and
the customer. Moreover, the authors describe how to leverage customer
relationship management (CRM) technologies to streamline the selling
center and the buying center with more team collaboration, data accessibility, and readiness.
The objective of key account management is to increase the value of
the relationship to the stakeholders of both organizations. To achieve this
value optimization, the authors have integrated the processes/objectives/
planning of key account management and sales effectiveness while leveraging information, technology, and relationships. To this end, this text
provides direct, action-oriented answers to the following key questions:
When should a key account program be implemented and when should
it not? How does one align key customer and supplier interests? How to
manage the selling center and the buying center? How is value co-created
for key customers and suppliers? How can complex customer and supplier processes be streamlined through CRM systems to better integrate
the buying center with the selling center? How can key account programs
viii ABSTRACT
maintain and grow market leadership through key account managers

critical role?
By leveraging up-to-date research, testimonials drawn from interviews
with experienced practitioners, best practices of successful companies,
along with straightforward practical guidelines for executives and sales
leaders, this book can serve as an instruction manual and toolbox for
organizations working to achieve success through their key account strategies to meet the demand of their key customers.
Keywords
Key account management, key account managers, large customers, complex sales, selling center, buying center, buyerseller relationships, sales
management and leadership, value co-creation, collaborative CRM, sales
technology.
Contents
Acknowledgments....................................................................................xi
Preface..................................................................................................xii
Introduction.......................................................................................... xv
Chapter 1 Key Account Management, Organizational
Alignment, and the Selling Center.....................................1
From Treating All Customers Alike to a
Key Account Strategy......................................................1
Implementing Key Account Management
inComplex and Dynamic Companies..........................17
Chapter 2 Building and Delivering Value to Key Accounts...............45
Integrating the Selling Center with the Buying Center.....45
Value Analysis and Delivery to Key Accounts...................70
Chapter 3 Leveraging Collaborative CRM and Technology..............89
The Value of Collaboration and Information
inKeyAccount Management.......................................89
From the CRM Concept to CRM Value
forKeyAccounts........................................................106
Chapter 4 Business Customer Marketing and Key Account
Development.................................................................115
Marketing Strategy and Analysis
for Key Account Customers........................................115
From Key Account Development to Market
Leadership..................................................................132
Conclusion..........................................................................................140
Biographies..........................................................................................143
References............................................................................................147
Index..................................................................................................151
Acknowledgments
We thank Buddy LaForge and Thomas Ingram, co-editors of the Selling
and Sales Force Management collection, for their support and feedback
on a previous draft of this book.
Preface
Throughout its 50 years of existence, the Strategic Account Management
Association (SAMA) has seen constant transformation in the art and science of managing customer relationships. As the present CEO of SAMA,
my vision of sales, based on multiple concrete benchmarking examples,
is this: Either sales are transactional and eventually will go to both the
web and the channels, or sales are high-touch, high-value. And the best
way to manage this will be through strategic account management/key
account management/global account management (SAM/KAM/GAM).
Furthermore, we at SAMA always stress that SAM is not a sales strategy.
It is a corporate strategy.
At the core of SAM/KAM/GAM is the strategic value co-creation
process. The strategic value co-creation process is, simply stated, how
you (the strategic customer) and we (the strategic supplier) will make
more profits. At the core of strategic value co-creation are the following
key questions: Are all our key clients ready to co-create with us? Do we
have the right customer relationships to drive value? How do we drive
change management within our sales teams? How do we address sales
productivity and monitor sales performance? And how does this fit into
the CRM system?
The book, Key Account Management: Strategies to Leverage Information, Technology, and Relationships to Deliver Value to Large Customers,
addresses most of the above questions. It gives a very complete, comprehensive, and easy-to-understand description of the critical elements
of SAM/KAM/GAM initiatives and of the critical enablers, which are
information, technology, and relationships.
The book introduces the Selling Center Alignment Process (SCAP),
which explains the way the supplier must organize. It also proposes the
Key Account Management Process (KAMP), which specifies a formalized
plan to orchestrate effective working relationships with large customers.
Last but not least, it defines how adapted CRM systems help develop
customer relationships.
xiv PREFACE
We all know that basic CRMs are insufficient and even somewhat
irrelevant to the effective management of strategic customer relationships
and to the strategic value co-creation process. The merit of the book is
to show that, by integrating the three key elementsSCAP, KAMP and
adapted CRM systemsyou compensate for the inability of basic CRM
systems to help the strategic value co-creation process. In the book, the
description of CRM CAR, which stands for Collaboration, Accessibility
and Readiness, shows how adapted CRMs thoroughly help SAMs and
KAMs manage the complexity of their job.
I would like to praise the authors of the book, Jol Le Bon and Carl
A. Herman, both for recognizing the critical importance of technology
and CRM systems in the art and science of managing strategic customer
relationships, and also for proposing an enhanced and unified Customer
Relationship Management process that will undoubtedly make the job of
the SAM/KAM/GAM more effective.
Bernard Quancard
President & CEO, SAMA
The Strategic Account Management Association
Introduction
Modern companies, seeking to sell to todays customers, confront a critical and challenging truth: Those customers are remarkably savvy. They
demand more attention, superior service, and the expertise of a dedicated
sales team. They know a great deal about the marketplace, pricing trends
and features, and which competitors are available. They also continue to
grow increasingly savvy, knowledgeable, and informed about their options all the time.
In response, suppliers are forced to make increasingly difficult choices
about how to allocate their limited resources and which customers to prioritize by providing them the highest level of service. Even suppliers that
promise to provide every client with the same excellent level of service
cannot treat all customers equallynor should they want to. Instead,
for virtually every business-to-business sales organization, at every level,
disproportionately large shares of their revenues and profits come from
a relatively small subset of customers. Having identified these top-tier
customers, it remains up to the supplier to decide how to treat them and
how much to invest in offering them higher levels of care, though a supplier that chooses not to invest more in its relationship with these valuable
customers will confront another own set of uncomfortable, unfortunate
consequences. Treating all customers the same means that each customer,
even the biggest most important ones, has the same potential to leave or
stay with a supplier and increase or decrease suppliers business.
Organizing, implementing, and managing a successful key account
program is one of the most challenging strategic initiatives a supplier can
undertake. This book is written to help organizations navigate this challenge. It is the best of both worlds, grounded in rigorous academic research and balanced with pragmatic and implementable real world ideas.
This work is more a workbook than a text with multiple specific ways to
create a viable key account program and then manage it, and the accounts.
In Chapter 1 we begin by clearly articulating why supplier organizations should manage their key accounts differently. Then we discuss how
xvi INTRODUCTION
to identify them, and how to create teams to manage them. We introduce

SCAP, the Selling Center Alignment Process, to identify the members of
the key account team and the roles each member plays wherever they are.
Indeed, the selling center is geographically and organizationally dispersed.
Members are often part of many different business units. Customers have
multiple touch points into the supplier organizationand multiple virtual places to talk about the supplier outside of either organization. This
is why an alignment process is needed.
Chapter 2 is about the customer, and large ones. What is value for
large customers? What is the complex sales process that is necessary to
effectively manage and sell to the key account and create the identified
customer value? Once we understand the process, we discuss how the
selling center works with the accounts buying center using a unique new
concept, KAMP, the Key Account Management Process. In fact, the sales
process for large customers is neither sequential nor simple. It is about
managing long-term and complex projects with multiple stakeholders of
diverse expectations from the buying center and the selling center; a situation which can be challenging without specific guidance.
Today the use of technology to manage customer relationships can be
a competitive differentiator for supplier organizations. For key account
management, the primary technology should be customer relationship
management (CRM) systems. But, more often than not, attempts to
use CRM are not successful. In Chapter 3 we clarify why technology is
so valuable in the key account context, why it is difficult to implement
successfully, and how to overcome these difficulties. We introduce CRM
CAR for Collaboration, Accessibility, Readiness, to depict what top executives should be looking for and driving when leveraging CRM technologies for key account management.
Finally, in Chapter 4, we connect corporate and marketing strategy
to the key account program we have now defined and are ready to implement. We discuss how critical key accounts are to a successful marketing
strategy. We describe key account portfolio management and explain how
key account managers can differentiate the value proposition to retain
and grow the most interesting customers. We also emphasize the sales
INTRODUCTION
xvii
leader role key account managers should undertake and describe how
they can coach the buying center.
We conclude showing how SCAP, the Selling Center Alignment Process,
KAMP, the Key Account Management Process, and CRM CAR, Collaboration, Accessibility, Readiness, perfectly blend together when describing the
realm of key accounts and eventually present SCK to Secure the Customer
Kingdom.
Managing large, complex, and demanding customers is challenging,
rewarding, and fun. It is also always stressful and at times frustrating.
We hope the ideas, concepts, and frameworks developed in this book
will help make key account programs and management an enjoyable and
valuable experience.
CHAPTER 1
Key Account Management,

Organizational Alignment,
and the Selling Center
In many ways a firms most valuable financial asset is its customer base.
Don Peppers and Martha Rogers
Setting up a key account program and strategy requires a careful analysis

of the customers as assets, along with the suppliers strengths and weaknesses. Because selling to large customers consists of multiple stakeholders, key account programs should be built upon a clear vision and specific
organizational resources which need to be aligned. In this chapter, we
specify the criteria that help define key account customers and define
selling centers structure and behavior. We also provide a framework for
aligning the selling center with the key account strategy.
From Treating All Customers Alike

to a Key Account Strategy
Customers as Assets and Key Accounts
Workman, Homburg, and Jensen define key account management as the
performance of additional activities and/or designation of special personnel
directed at an organizations most important customers. They further define
key account management effectiveness as the extent to which an organization achieves better relationship outcomes for key accounts in comparison with
average accounts.1 Key account management represents a specific business
KEY ACCOUNT MANAGEMENT
strategy involving complex sales processes, large-scale negotiations, and

the alignment of multiple internal and external stakeholders. The decision to implement a key account program stems from two separate conclusions reached by a supplier:
Our largest and best customers are critical to our success and
must be managed differently.
To ensure our success with these critical clients, we must
proactively change our organization.
When it invests in a key account management processidentifying
key accounts, gaining an understanding of their business and their needs,
and designing a sales effort to meet those needs and then anticipate whats
coming nextthe supplier side anticipates the long-term retention and
growth of its most valuable client resources. Yet the multi-pronged processes for achieving these outcomes are anything but straightforward, and
the business press is filled with sad examples of key account programs that
have fallen short of expectations. Therefore, this chapter begins with some
suggestions for helping managers in a supplier organization arrive at the
two key conclusions.
Multiple factors lead to the companys ultimate decision to shift its organizational perspective to recognize the primary importance of its most
valued accounts. To understand the factors that lead to this shift, this
chapter explores both historical customer relationship trends and some
persuasive customer management concepts. Taken separately, each element makes a case for a key account focus; taken together, they leave little
doubt that making the strategic decision to transition to a key account
strategy is determinant of the continued success of most business-tobusiness (B2B) suppliers.
Historical Trends Supporting a Key Account Strategy
In his 2001 book Key Account Management and Planning, Noel Capon
identifies three multi-decade trends that have prompted greater reliance
on key account strategies:2 (i) increasing account concentration, (ii) the
KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT
rising importance of procurement, and (iii) changes in the supply chain

or the procurement process. To this list, we add (iv) the expanded use of
technology to manage key accounts.
Increasing Account Concentration. The consolidation of buying power
in the B2B sector over the last decade has increased the importance of
key account management.3 There has been a trend since the middle of the
20th century from industries with many small and medium businesses
to oligopolistic industries with a small number of very large companies.
In 1972, 16 percent of the packaging industrys revenue came from five
customers. By 1996, the industrys top five customers were responsible
for 76 percent of revenue.4 Looking at it from another angle, the value of
public (large) companies as a percentage of current gross domestic product is two and one-half times what it was in 1980. Further, adjusted for
inflation, the 500th largest industrial corporation in 1955 had revenues
of $436M; in 1980, $1,242M; and in 2013, $4,955Mmore than a
10-fold increase, in todays dollars, in the size of the 500th largest
company.5
These rising sizes parallel an oligopolistic trend in many industries,
driven by factors such as globalization, size-based efficiencies, and merger
and acquisition activity. Thus industries as varied as the financial services,
health care, airlines, automotive, and energy sectors all have experienced
significant consolidation.
Whatever the reason, suppliers have fewer and larger customers than
in the past, which makes each of these huge customers more important.
To grow, suppliers must pursue this shrinking customer list, and the financial impact of losing just one customer is substantial.
The Rising Importance of Procurement. Similar to a trend in many business schools, supply chain management is the fastest growing major at
the Bauer College of Business at the University of Houston. In Houston,
as elsewhere, demand for undergraduate students with a strong educational background in supply chains is intense, driven primarily by the
large global companies with operations in the area. Manufacturing and
production also are becoming more capital and equipment intensive but
less labor intensive. In turn, purchasing expenses, as a percentage of revenue, are increasing, whereas the labor expense ratio is decreasing, which
also makes the procurement function more important.
Many companies also are divesting themselves of their non-core businesses, rather than persisting in the previous trend toward vertical integration. The focus on core concentration increases the importance of
procurement, because companies now must purchase materials and services that they might have sourced internally in the past.
Finally, demand for lean manufacturing techniques, which prioritize
the speed and accuracy of the supply chain, makes procurement capabilities even more important. As Dave Schneider, Continuous Improvement
Manager at Dell America, notes, our close relationships with customers
and suppliers allow us to know what we must be able to supply in real time,
and then very quickly and precisely meet that demand while maintaining low
inventory.6
Changes in the Supply Chain or the Procurement Process. As Dan
Domeracki stated when he was Vice President of Government and Industry Relations and former Director of Global Accounts at Schlumberger International, in the last three years, our largest, most important
global accounts have implemented strategic sourcing and strategic procurement practices.7
In the late 1990s, Chevron rationalized its global supplier list by reducing its total number of suppliers by 80 percent, then segmenting the
remaining 20 percent into five categories. The top two segments were
designated strategic, and suppliers in these two top tiers were essentially
required to create a key account program for Chevron. Between the late
1980s and mid-1990s, General Motors reduced its suppliers by 45 percent, from 10,000 to 5,500; in a similar period, Motorola instituted a
90 percent reduction, from 5,000 to just 500 suppliers.8
Even as procurement has become more centralized, it has gone
global. In a recent project the authors of this book undertook, we provided services to a Fortune 100 industrial services firm. After signing the
contract in Houston, we delivered the services throughout Texas and the
Midwest, but the clients procurement functions had been centralized
in Manila. Such simultaneous centralization and globalization of procurement can strain existing sellerbuyer relationships in many companies, which may be the intended goal. By minimizing the significance
of these relationships, a greater emphasis can be placed on price and
procurement terms.
The supply chain and procurement functions have become much
more strategic at many companies. It is a competitive differentiator for
such diverse companies as Dell, Apple, Southwest Airlines, BP, Procter
and Gamble, and Wal-Mart. As supply chain management becomes a
more critical component of a firms overall strategy, the supply chain function and management become more important in the organization, often
becoming a member of the C-Suite reporting directly to the President or
CEO. This is the reality that Dan Domeracki at Schlumberger referred
to above. Today, the Schlumberger global account directors that work
with Schlumbergers largest customers, such as Exxon, BP and Chevron,
work with senior supply chain executives that report to the President or
other members of the C-Suite. Just a few years ago their relationships
were with mid-level procurement managers in each of their customers
business units.
The Expanded Use of Technology to Manage Key Accounts. Since
Capons seminal work, changes in technology have had a profound effect on a suppliers relationship with all its customers. The impact on a
suppliers most important customers can be a positive one, increasing the
mutual value of the relationship, or a negative one making it easier for a
customer to switch suppliers. We will discuss four major changes in key
account relationships caused by recent technology innovations:

1. Supply chain integration

2. Collaboration and communication
3. Innovation and co-creation
4. The impact on the cost to switch suppliers
One of the most important technology innovations of the last few

years is the integration of a customers complex supply chain among
multiple suppliers. In many cases todays largest customers require this
integration from their suppliers. One well known example is Procter and
Gambles (P&G) integration with Wal-Mart. P&G monitors inventory
levels for its products at Wal-Mart stores and is responsible for delivering
the right amount of product to the right stores at the right time. This is
an example of the integration of the buying and selling process within the
supply chain. Another example from the B2B sales world would be the
integration of the request for information (RFI) to payment process. In
this case communications and information technology solutions integrate
the RFI to request for proposal (RFP) to procurement process; then the
procurement to delivery process; then the delivery to invoice to payment
process. Leaders in the IT industry have this integration with their customers today. IBM, Microsoft, Dell, and Apple all provide direct supply chain and payment integration through their websites with their best
customers procurement organizations. They also provide a level of direct,
project-related support using todays available technology. Grainger, a
multi-national supplier of commercial and industrial operating products,
uses information technology to seamlessly integrate their maintenance
and repair (M&R) supplies system with their best customers stores inventory, contractually allowing Grainger to automatically place orders as
needed. This use of technology significantly increases the competitive barrier to Graingers competitors and helps reinforce Graingers importance
to its most valued customers.
Technology has also been the catalyst for sales organizations to adopt
a leading-edge use of collaboration and communication technology,
which can increase the value and stickiness of a companys key account
relationships. Todays technology includes the ability to easily collaborate
and communicate. This means geographically and functionally dispersed
buying centers collaborate on significant procurements. Equally globally
and functionally dispersed selling centers collaborate on significant sales
opportunities. And, in the key account environment, buying centers and
selling centers all geographically and functionally dispersed collaborate
together increasing efficiency and, for the selling center, creating a potential barrier to competition. The selling center is described later in this
chapter, the buying center is discussed in Chapter 2, and the ability for all
these groups to communicate and collaborate is described in Chapter 3
when we discuss customer relationship management (CRM).
Looking only slightly forward into the future the impact of technology includes the ability to integrate the product development and innovation processes into co-creation opportunities. In fact, a willingness
to collaborate on design and development was a requirement for many
suppliers bidding to become part of the Boeing 787 Dreamliner team.
Switching-costs, the cost a customer company incurs when switching
from one supplier to another, have major implications for a companys relationship with its most important customers. In the past, suppliers had the
small comfort of knowing that, in order to coax a customer away, a competitor would need a truly significant advantage, since minor discounts or slight
differences in quality and service often did not warrant the cost the customer
would incur during the process of switching suppliers. In short, it was expensive to change vendors and products. Suppliers had that knowledge and felt a
little more secure in their customer relationships because of it.
Because of technology, the tasks of researching, negotiating, purchasing, and learning to use new products and services are commonplace outside the customers organization. Just a few years ago, to look for a part
to repair a broken pump or add memory to a computer a buyer looked at
internal documentation or called the supplier and spent time (sometimes
lots of time) on the phone determining the correct part. Today, as we all
know, we Google it. Thats very productive, but provides an opportunity
to look at many suppliers for that part or memory. That easy, seamless opportunity was not there just a few years ago. This is one of many examples
of how technology often reduces the cost of switching suppliers.
Customer Management Concepts Supporting
a Key Account Strategy
Shifting away from the notion of treating all customers as if they were of
equal importance to the organization, and moving toward a more profitable key account focus, should result from a close consideration of a customers value, in accordance with three customer management concepts:
1. Customer lifetime value (CLV) (or customer asset or customer equity)
2. Unrealized potential value (UPV)
3. The Pareto principle (or 80/20 rule)
We introduce these three concepts here as further justification for

implementing a key account strategy. We will discuss them in more detail
later when we use them to help us choose the specific customers to include in our key account program.
Customer Lifetime Value. Customer lifetime value represents the expected revenue a supplier can earn from a customer over the life of the
relationship, less the cost of that relationship. The performance of the
customer asset, as with any asset, should be monitored over time. CLV
should be discounted to a net present value (NPV) to facilitate comparison and ranking across customers. Customers ranked at the top of this list
are likely the most critical to the long-term health of the supplier.
Most CLV models rely on an assumption of some customer volume
consistency, such that the supplier can expect some customer turnover
over time, and this turnover generally is consistent. Subject to economic
conditions, existing customers also likely purchase similar sets of products
and services in similar quantities each year. The greatest potential for additional profit involves products and services that the supplier currently
is not selling to the customer. Therefore, the CLV and customer asset
concepts, which assign value to customers by assuming consistent buying
futures, can leave suppliers with incomplete insights and an inaccurate
ranking of each customers long-term strategic importance. That is, even
though CLV is critical information for sales organizations, the information it represents becomes useful only in concert with an analysis of those
customers UPV.
Unrealized Potential Value. Unrealized potential value refers to the
amount the sales organization theoretically could increase the value of a particular customer if it applied a strategy for doing so.9 One of the most effective of these strategies is implementing a key account program. UPV
can be thought of as the combination of cross selling, up-selling, and
co-creation. Cross selling is adding products and services to the ones currently being sold to an existing customer. These are products and services
the supplier already has in their product catalog. Up selling is selling more
of the same products and services a supplier is currently selling to a customer.
This is usually accomplished by selling these same products to additional
business segments or geographic markets. Co-creation is collaborating with

the customer to develop and sell new products or modify and sell existing ones
to meet a specific need of that specific customer. A companys opportunity
for organic growth relates directly to the UPV of current and future
customersfrom the suppliers perspective, that is. From the customers perspective, potential value refers to their needs. This distinction is
important: The upper limit of any customers value must be defined by
that customers need, not by the suppliers current product or service
offering.10 It also leads to the following dictum: A Customers UPV is
Almost Always Greater than its CLV.
For a supplier to increase its customers profit potential, it needs to
understand that the greatest potential for growth comes from tapping
those product and service needs that it currently is not meeting. The
products and services not being sold to the customer represent its current and future needs, which often holds greater profit potential than
the needs that the customer believes already are being met. We offer
some additional examples and further exploration of the UPV concept
when we present the Open Space concept and analysis later in this
chapter.
The Pareto Principle (or 80/20 Rule). The Pareto principle serves as a
sort of crosscheck, able to validate or challenge the outcomes of the CLV
and UPV relative customer value analyses. Also known as the 80/20 rule
or The Law of the Vital Few, the Pareto principle states that in many
situations, roughly 80 percent of any effects result from 20percent of the
causes. The origin of the concept is widely attributed to management
consultant Joseph M. Juran, who named it after Wilfredo Pareto, an
Italian economist who observed in 1906 that 80 percent of the land in
Italy was owned by 20 percent of the population. He also noted that
about 20 percent of the peapods in his garden contained 80 percent of
the peas.11
The effect goes beyond land and peas. In virtually all corporations,
some form of the 8020 rule operates, including in relation to earnings:
80 percent of a firms revenues come from 20 percent of its customers.
The disproportionately high (current and potential) volume, high profit
10
customers represent the firms critical assets. Even if they are not clearly
distinguishable on a balance sheet, they are more important to long-run
survival and growth than many of the firms fixed assets.12
Whether companies use these three concepts explicitly or implicitly,
two undeniable conclusions remain:
1. A disproportionately large share of a companys revenue and profit
come from a small percentage of their customers.
2. Retaining and growing these customers is critical for continued
success.
By employing the customer management concept trifecta (CLV, UPV,
and the Pareto principle), suppliers can, and should, identify and rank the
few customers who represent the greatest prospect for achieving success.
Perceiving these accounts on the basis of their potential value all but crystallizes the case for key accounts.
The Case for a Key Account Strategy
Lets summarize the case for a key account strategy. First these four trends:
increasing account concentration, the rising importance of procurement,
changes in the supply chain or the procurement process, and the expanded use of technology to manage key accounts make a key account
strategy a natural extension of the marketing strategy for many suppliers.
Second, and more persuasive is the reality of the value of a companys
largest accounts.
A practical exercise will prove the point best. Create a list of all your
customers based on the total revenue (or gross margin) for each customer
for the last 3 years, ordered from most to least revenue. We did this at the
Bauer College of Businesss Sales Excellence Institute in regard to our customers. When we create this list for our organization we reach 50 percent
of our total revenue at the 16th customer out of the 3,776 customers in
our database. We reach 40 percent of our revenue at the 8th customer. We
have the resources to support about 24 key accounts. Those 24 provided
64 percent of our three-year revenue total. A Fortune 100 B2B firm we
work with did this analysis and found that 57 percent of total revenue was
11
reached at the 19th customer on their list of 2,700 customers. Customer

value is usually even more concentrated if a supplier uses CLV or UPV
to order the list. This is consistent with what many suppliers find today
when they perform this analysis: they have a small number of large, powerful, strategically important customers.
Because innovative concepts and cutting-edge analytical tools make
it possible for suppliers to identify the customers that are the most valuable and most profitable, as well as those that have the potential to be of
even greater value to its companys future success, there is a clear means
to achieve the benefits and avoid the threats of the current competitive
marketplace. A suppliers most important asset is its key accounts; creating and investing in a strategy to retain and grow those accounts is one of
the most important and effective means of ensuring long-term success. It
is also the topic to which the remainder of this book is devoted.
Retention Versus Growing Versus New Accounts
An industrial chemical company with which we have worked takes a simple, three-pronged approach to managing customer relationships, all with
an action focus: retain, grow, and gain. When it comes to key account
customers and management, the focus should remain on retain and grow.
The first order of business is to retain existing profitable customers,
because protecting the customer and revenue base is a central determinant of financial performance, every single year. Next, the firm seeks to
grow these same customers. According to the company that employs this
three-tiered approach, and as research confirms, it is easier and more profitable to sell new products and services to existing profitable customers
than to sell to new customers. Finally suppliers must work to gain new
customers. Independent of any sales organizations best efforts, some customers defect each year. Replacing them with new customers is required,
just to maintain current performance, much less expand. Retaining and
growing existing customers rarely is enough to achieve growth objectives.
Great companies like this industrial firm make a point of practicing each
of the three customer management approaches. For key accounts, the
importance of the retain and grow sides of this triad are magnified. Note
that we did limit this retain, grow, gain discussion to profitable customers.
12
Unprofitable or undesirable customers must not be part of a key account

program. The identification of these undesirable accounts is discussed in
the key account selection process later in this chapter.
We first explain why gaining new customers should remain a secondary objective in key account management before detailing why retaining
and growing should be the primary one.
Gaining Customers: A Secondary Objective in Key Account
Management
B2B suppliers have marketing strategies and performance goals to acquire
new customersthe gain of our triad. Many of these companies have
specific salespeople or sales groupshunterswhose sole function is to
sell new accounts. It is a difficult, challenging job. In an often cited Harvard Business Review article Hart, Heskett, and Sasser said that it costs
five times more to replace a new customer than retain an existing one.13
There have been many other estimates about the difference in cost to acquire, versus the cost to retain, and it certainly differs depending on the
industry and culture. But, a sale costs more from a new customer than
an existing one. There are many reasons for this additional cost, such as
marketing and promotion costs, price erosion, pre-sales efforts, proposal
preparation, and so on. One critical reason that is often overlooked is the
rate of failure of attempts to sell a new customer. Suppliers do not know
the who, what, when, and how of new customer purchases. In contrast,
they are likely to know many of the acquisition practices of existing customers and very likely to know how their key accounts buy the products
and services they sell. While we do not underestimate the importance of
acquiring new accounts for a suppliers long-term success, it is not part of
a key account strategy. Key accounts come from existing customers. Suppliers should not invest key account resources in companies that might
not buy from them. That does not mean key accounts are limited to our
largest accounts, size is only one of six key account selection criteria we
will discuss in the next section.
Suppliers must invest the time and resources to monitor the health
of their existing relationships and take any reasonable actions necessary
to retain their critical corporate assets. And all healthy companies have
13
a strategy to acquire new customers. But growth is where the action is.
Every year, most of a B2B companys growth should come from existing
accounts. As we will see below, a proactive key account program that
relies on Open Space analyses can help ensure that a significant share of
customer base growth comes from key accounts. That is, understanding a
customers strategies and objectives, as well as how the suppliers own solutions can support these objectives, helps ensure long-term relationships
and win new business.
Retaining Customers: Protecting the Customer Asset
Lets start with a notable statistic. The probability of a sale to an existing
customer is 60 to 70 percent. The probability of selling to a new prospect
is 5 to 20 percent.14 Consider the relationship of Wal-Mart and P&G. In
2011, the retail giant accounted for 15 percent of the consumer goods
suppliers revenuemore than any country other than the United States.
In a previous position as the vice president of sales for a Fortune 100
industrial services firm, one of us realized that more than 65 percent of
revenue came from just 15 accounts. Not 15 percent that is, but literally
15 individual customers, responsible for most of the companys revenue.
With such staggering ratios, it quickly follows that suppliers must take
incredible precautions to protect, and secure, these accounts. The most
effective protection is a key account strategy. Strategic key account programs ensure additional investments of time and resources, and they offer
the sales team sufficient flexibility to manage the accounts in whatever
unique way best supports the profitable customersupplier relationship.
Growing Customers: Developing the Customer Asset
Moving to grow, we feel compelled to emphasize the often-overlooked importance of key account management for leveraging the inherent potential of
growth. Growth from existing accounts comes from four different sources:
1. Increasing sales of the same products and services to the same customer segment. This organic growth occurs because the customers
needs are growing.
14
2. Increasing sales of more expensive and more profitable products and

services to the same customer segment. This is up-selling, the objective is to make more profitable sales.
3. Selling different products and services from the suppliers existing
catalog to the same or different segments of the customers business.
This is cross selling, the objective is to increase the income and the
value a customer gets from the supplier.
4. Creating new products or services that the customer needs that
are not in the suppliers existing product catalog. This refers to cocreation, the objective is to leverage the collaborative relationships
established with the customer.
The first of these, organic growth, is a result of retaining key accounts
and profiting from the success of the customer. The other three occur
because of growth opportunities that must be identified, pursued, and
won. As mentioned before, such intent falls under the UPV approach
that allows a supplier to dramatically increase the value of its customer
and its key account strategy.
To strategically and proactively identify these growth opportunities
we will use an Open Space analysis. In a table showing every product (or
product segment) a supplier has to offer a key account on one dimension
and every one of that key accounts business or geographical segments on
the other dimension, each intersection or cell in the table is an opportunity for the suppliers products or services. The supplier is the incumbent
in some of these cells; we already provide that product to that segment
of the customers business. These intersections are black. The rest of the
cells are open, the supplier does not provide that product or service to
that business segment. Even this basic analysis requires extensive knowledge of the key accounts business and is usually only worth the effort
for key accounts. What is interesting is that there will almost always be
more blanks or Open Space (intersections where the customer is not
using the suppliers products or services) than there will be intersections
in which the supplier is providing the customers needs.
The relatively simple Open Space analysis in Figure 1.1 depicts the
needs of a key account of an oil field services company. The vertical axis
shows the key accounts geographic business regions, each of which is
15
Figure 1.1 Simple Open Space Analysis
segmented into business segments within each region (defined by the customer). The horizontal axis reveals the suppliers business units. Every
cell that does not have a current sales value in it represents potential
growth, beyond the suppliers current installed base. This is the land of
opportunity.
This simple approach to identifying new push opportunities is enhanced with two additional concepts. First, alignment of the suppliers
offerings with the customers business strategies, and second an accurate
assessment of competitive positioning in the Open Space (Figure 1.2).
To identify sales opportunities aligned with the customer, the supplier should identify those cells in the matrix that are the most important to the customers current strategies and initiatives. For example, this
customer has a goal to increase exploration to grow their production in
Africa. The first four columns of the above matrix are the suppliers exploration product line. These four columns in the Africa row are potentially
valuable solutions for the customer because the solution would support a
specific corporate strategy or initiative. These four cells should be coded
to show this intersection of supplier product with an important customer
strategy. Intersections where suppliers valuable solutions intersect with
the customers most important strategies are where suppliers have the best
16
Figure 1.2 Enhanced Open Space Analysis
opportunity for growth and the best opportunity to increase the value
of the relationship beyond just a provider of good products and services.
Performing this level of analysis adds to the knowledge about the customer that the key account team must have. This is an example of key account management at its best, identifying an opportunity to use supplier
offerings to help the key account achieve their strategic goals.
To analyze the competitive positioning in the key account the key
account team should also identify those cellsintersections of suppliers
offerings and key accounts business segmentswhere suppliers competitors have a more favorable position than the supplier with that business
unit for that product segment.
Our Open Space analysis now shows us:
The key accounts business segments that do not use our offerings.
The key accounts business segments that do not use our
offerings and are important to the execution of the key
accounts business strategies.
The key accounts business segments where our competitors
have an advantage.
17
The analysis provides a valuable perspective on how suppliers may

find strategic directions to grow customers with potential meaningful opportunities. Open Space analysis starts with the customer and requires
in-depth knowledge of the customers entire business, which is likely for
only key accounts. In addition, an Open Space analysis demands substantial time and effort not only to undertake the comprehensive analysis but
also to execute the individual customer strategy and modify it as necessary
over time.
Implementing Key Account Management

in Complex and Dynamic Companies
So you are ready to implement a key account strategy. You have been
convinced that it is the right thing to do. In the short and medium term,
it will enhance your firms financial results. It will support your long-term
health and continued growth. By co-creating innovative products and
services with your key accounts, you can increase your market share in
all your product and customer segments. So the next step sounds simple:
Pick a few of your biggest, highest potential accounts, assign the best
salespeople to them, and wait for the sales to start rolling in.
Not so fast. Few companies that have implemented key account programs write them off as total failures. But few companies achieve the benefits they expected from their incremental investment. Thus, we provide
guidelines for establishing not just a key account strategy, but rather, a
successful key account strategy.
Identifying Key Accounts and Building the Selling Center
As described above for any key account management initiative, the
supplier must start by identifying the target customers to become key
accountsas well as excluding those customers that are not good candidates. Then, the second step is to develop a selling center that includes
the account leader to take responsibility for each of these key accounts.
Only after the selling center has been established can the supplier take on
the complex, critical task of researching each of the potential target accounts, developing a strategy, and determining the appropriate short- and
18
long-term objectives. The end result of this process will be a set of metrics
for each account, defining success.
Identifying Key Accounts
There are two central questions associated with the process of finding
targets:
1. How many?
2. What criteria should we use to identify them?
The question of numbers is obvious at this stage of development, but
its answer should wait until later. The answer will be the exact number of
customers that are worth the additional investment. Because a supplier
cannot know what its investment will be yet, or if the funds and resources
will be available, at this stage, all it can establish is that a key account
program should start small and grow. In a project with a highly respected
Fortune 100 industrial firm selling to the electronics industry, we helped
it identify 37 potential key accounts, but it wisely started with just 7 in
the first 2 years of its program.
The criteria are a little easier to define at this point. We discuss six of them:

Size
Strategic importance
CLV
UPV
Account fit
Relationship method
Only after understanding and applying these criteria, researching each

potential key account, and developing an account strategy and objectives
is it possible to finalize the initial key account list.
Size. Size matters, and it is easy to measure. Consolidation has created
an obvious Pareto curve in most industries. In 2013, of the 88 million
vehicles produced, 32 million came from the top five automakers.15
Nippon Steel, Wuhan Steel, US Steel, Firestone, or Bridgestone, all must
19
include these five automakers on their key account lists. In 2013, there
were 13.5million hotel rooms, and 3.1 million were owned or managed
by the top five hospitality companies. Therefore, Sysco Foods, Ecolab,
and Whirlpool all include these five firms on their key account target lists.
In these examples, we purposefully use volume, rather than revenue,
as our size metric. The list of customers often is similar across both measures, but volume is a more convincing and relevant measurement. There
is a direct correlation, for example, between Hiltons 650,000 hotel rooms
and the potential market for Whirlpools laundry products.
Strategic Importance. Strategic importance matters too, but unlike size,
it is difficult to measure. Determining the organizations that are leading the
trends in the industry is an inherently subjective exercise. Whose opinion
matters in creating this list? Internally, the suppliers marketing or product
managers likely have in-depth knowledge of trends in the customers industry. Externally, thought leaders, visionaries, and experts watch each industry, and then offer their assessments. But the choice is inherently risky.
Consider an example. An industrial company we worked with included Google in its list of seven key accounts for the electronics industry,
even though in terms of size, CLV, or UPV, it would not have passed the
test for a key account. At the time, Google ranked 53rd among the 500
largest global electronics and hardware companies, and after divesting the
legacy Motorola cell phone division, it fell off this list completely. But if
this supplier wanted to develop innovative electronics products, co-creating with Google offered superlative potential. As a corollary, if it failed
to enter into a high value key account relationship with Google, it might
fail to identify developments in the industry, which would have major,
long-term, negative consequences. Similarly, Westins Heavenly Bed and
other innovations make this hospitality company an attractive key account target, regardless of its size.
Therefore, fitting the strategic importance criterion demands the
use of a wide range of available internal and external sources of industry
knowledge to find the right industry companies to add to a key account
target list. We will look at strategic fit again in Chapter 4, when we discuss
portfolio analysis. The concept will help us determine where to allocate
scarce selling center resources among our key accounts.
20
CLV (Customer Lifetime Value). As described before, CLV is a quantitative measurement that allows a supplier to determine the relative value
of each of its customers. Recall that in simple terms, CLV is the sum of
the NPV of all purchases by a customer, less the cost of those purchases
for the life of the suppliers relationship with the customer, less the acquisition cost. Many marketing models estimate the CLV for an individual
customer.16 These models make assumptions about critical variables, such
as the time horizon, retention, and changes in volume. Calculating CLV
for all a suppliers customers requires accurate historical data and reasonable assumptions for these variables. Completion of the analysis results
in a list of highest value customers that provides a framework for the key
account selection process. After this value has been determined, the sum
of all CLV constitutes the customer asset or customer equity. For our purposes, we are interested in the ranking of all CLVs, which allows for the
identification of members at the top of the list. To create a key account
target list, a supplier must first create a stacked ranking of existing customers, on the basis of their forecasted financial impact on the suppliers
revenue or profit. If necessary, the supplier might use simple trending
based on historical performance as an adequate proxy for CLV.
UPV (Unrealized Potential Value). UPV is not a common concept in
marketing segmentation, but in the world of key accounts, to understand
the long-term relative value of a list of customers, it is the most important
quantifiable criteria. This number will tell the supplier the size of the brass
ring associated with each account. UPV will identify some very promising customers that will not show up using other criteria. Unlike raw size,
which does not measure a suppliers potential, or CLV, which does not
look beyond the suppliers current customer product service mix, UPV
forces the supplier to consider the customer first. That means understanding the customers strategy, culture, issues, and plansa high bar. If the
supplier can understand the customer to this extent, it opens greater potential for product and service innovation and development. Actually, it
is incumbent on the supplier to seek these opportunities to identify UPV.
Account Fit. If an account is big, has potential to grow within a suppliers current product service mix and beyond, and is strategically
21
important, it should appear on the key account list. Yet the account fit
selection criterion, sometimes prevents an otherwise great account from
actually being a key account. We note three different types of fit: strategic,
operational, and cultural.
Strategic and operational fit, in a key account context, were first defined
and discussed by Richards and Jones.17 They define strategic fit as the degree to
which the buying and selling firms strategies align. Alignment suggests that
both buying and selling companies pursue similar strategies. For example, if
both customer and supplier seek a revenue growth strategy or an operational
efficiency strategy, their alignment supports a key account selection. Operational fit is the degree to which the customers service requirements align with
the capabilities of the selling company. In the oil and gas industry, global oil
companies have major operations where oil is, not necessarily where people
are, which would be the case in most other industries. Suppliers that lack
large-scale operations in Angola, Venezuela, and Papua New Guinea might
lack acceptable operational fit with companies such as ExxonMobil and Shell.
Then if an account needs product or service delivery, integrated order processing and invoicing, or supply chain integration, a supplier should make sure
these elements are easy and aligned with their own operations. A simple way
to understand operational fit is in terms of whether the account views the
supplier as easy to do business with, and vice versa.
Richards and Jones also describe third and fourth measures of fit:
shared values and personal fit. Those concepts become more relevant
when we begin to discuss delivering value to key accounts in Chapter2.
For the purposes of key account selection, we believe a broader, more
relevant category is culture, defined as the beliefs and values shared by the
companys senior managers.18 In turn, cultural fit is the degree to which
a customers and a suppliers senior managers beliefs and values are the
same, similar, or at least compatible. If both a customer and a supplier
have open offices, empower employees, and delegate decision making,
their cultures likely are compatible. If the customer also meets other criteria, it would be a good target key account. In contrast, if the customer
has a strong command-and-control culture, and the supplier has an empowerment culture, they probably cannot achieve a good cultural fit, so
even if the account is a large, profitable customer, it probably is not a
good target key account.
22
For many years, one of the authors met regularly with two wellknown, well-respected senior technology executives, one at ExxonMobil
and the other at Texaco. The ExxonMobil CIO valued integrity and honesty, and he did not like to be surprised. Any meeting with him required
you to be thoroughly prepared, concise, and to the point. He ran a tight
ship such that even the most massive projects in his organization were
delivered on time and within budget. His was a very rigorous commandand-control organization. The Texaco CIO was intellectually curious, always asking questions and always learning. Because he was so creative and
open to new ideas, he empowered his team to be innovative and forward
thinking. In meetings with either of these organizations, anywhere in the
world and at any level in the organization, the culture created by their
two leaders was palpable. Suppliers that sought to make ExxonMobil or
Texaco a key account organization would have needed to be cognizant of
their cultural fit. Suppliers and customers with similar cultures are much
more likely to develop long-term, mutually beneficial relationshipsthat
is, the goal of key account managementthan customers and suppliers
with conflicting cultures. The challenge for key account leaders is to assess
this fit objectively.
Relationship Method. A customers supply chain or procurement organizations have a preferred concept for the characteristics of their relationship with suppliers, their relationship method. These characteristics have
a significant impact on the profitability and desirability of the customer
to the supplier. For example, most procurement organizations focus on
buying product at the lowest possible price. But, that does not necessarily
mean they are unwilling for the supplier to make a profit. Many customers procurement organizations have policies and procedures requiring
competitive proposals for all or most products. For some customers this
means there is no loyalty to any one supplier. But for some, it does not
mean that. A history of a successful relationship can create loyalty between some customers and suppliers, even in an environment of tenders,
requests for proposals and competitive bids.
Customers whose relationship methods make it difficult for suppliers to sustain a profitable relationship are more common than previously
thought. In recent years, several studies have shown that the share of
23
customers with a negative contribution margin (revenue less direct cost

and cost-to-serve) can reach up to 30% in both business-to-consumer
(B2C) and business-to-business (B2B) relationships.19 Today using sophisticated CRM systems, many suppliers are able to identify unprofitable or undesirable customers and either change their method of dealing
with them, or divest these accounts. Prior systems were generally limited to measuring a customers gross profit or margin contribution. They
were not able to accurately allocate sales, service, and marketing costs to
individual customers. Today CRM systems such as Salesforce.com can
achieve this level of accurate customer profitability analysis.
Before we decide to reward customers by making them part of our
key account program we should understand why a customers relationship
method can make seemingly valuable accounts ones we want to avoid
investing in, much less make key accounts. The simple two by two matrix
in Figure 1.3 clarifies the impact of a customers relationship method.20
Using the newly available CRM information we can accurately classify
all our accounts into one of the four quadrants. There are many methods
for measuring customer loyalty in academic literature. For our purposes a
loyal customer is simply one who consistently buys from a supplier over
a long period of time. So, a stranger is a customer who buys infrequently
or only recently and when they do buy, they are very price conscious. This
is a call for a quote customer. Butterflies buy infrequently, but when
they do, the transaction is a profitable one. A friend buys regularly and
profitably while a vulture buys regularly but always requires prices or services that make the transaction unprofitable. Customers belong in their
Figure 1.3 Customer Loyalty and Profitability
24
respective quadrants in large part because of their chosen relationship

method. Butterflies provide fleeting high profits. They only fly in occasionally but when they do, they are not price sensitive. They should be encouraged to become more loyalfriends. Butterflies are rarely divested or
terminated. Suppliers do not have a lot of history with strangers. Suppliers
should continue to invest to try to convert strangers to friends. Vultures are
not profitable. They are loyal and will continue to buy from a supplier as
long as the supplier will give them the low price and favorable terms their
relationship concept requires. Vultures are candidates for termination in
specific circumstances. Indeed, if vulture customers are not good targets
for any combination of cross selling, up-selling, or co-creation strategies
where UPV can be found for the sake of profitable sales, they should
not be considered. Friends are valuable customers whether they meet the
other five criteria for key accounts or not. But only friends should be considered for and promoted to key accounts.
These six criteriasize, strategic importance, CLV, UPV, account fit,
and relationship methodprovide a supplier with the information necessary to choose among all a suppliers existing customers those accounts
that should be key accounts. These same criteria also provide important
insights into who should be a member of each accounts selling center.
Building the Selling Center
We have discussed why it is necessary for suppliers to create a key account
strategy and identified the criteria to use to choose key accounts. Now we
need to create an organization that can manage these critical company
assets most effectively.
Sales and key account management scholars propose the buying center concept, which offers a rich understanding of how companies organize to make their purchase decisions.21 We devote significant attention
in Chapter 2 to the buying center concept. In contrast, relatively little
research effort appears devoted to the reciprocal version of the buying
center, namely, the selling center.22 The limited studies we can find considered the interface between the buying center and a supplier organization.
Because buying centers focus on procurement processes, not long-term
buyerseller relationships, early research also noted the need for improved
25
buyerseller relationships during the purchase process. The resulting sales

teams organized themselves around winning sales opportunities. But such
opportunistic, virtual teams are not necessarily the types most likely to
ensure the success of key account strategies.
A key account selling center creates long-term relationships with key
stakeholders that represent the key account. A selling center for a key
account is a network of stakeholders connected to a key account that might
have a say in the course of a suppliers selling process and strategy. These stakeholders may be permanent or temporary members. Permanent members
always can affect the course of the relationship and maintain a vested
interest in its success. Temporary members sometimes influence the course
of the relationship and have a vested interest in its success.
Our generalized model of a key account selling center begins with
three distinct types of roles and multiple roles within each type:
1. Senior Management
a. Key Account Sponsors
b. Key Account Executives
c. Key Account Managers
2. Leaders
a. Subject Matter Leaders
b. Geographic Leaders
c. Supply Chain Leaders
d. Administrative Leaders
3. Contributors
We will describe each role and then discuss how to assemble the selling center for each key account.
Senior Management to Build, Steward, and Execute a Strategy. There
will be selling center members that come and go based on the Key Account Management Process (KAMP) described in Chapter 2. But successful key account management requires tenure and continuity at the
top. This necessarily starts with leadership. Executives are responsible for
the first two decisions by supplier organizations with regard to a key account strategy, that is, that (i) the companys largest and best customers
26
must be managed differently and (ii) the organization must change to

succeed among these critical customers.
The Key Account Sponsor has several selling center responsibilities
such as: emphasize the importance of the key account strategy across the
organization; support the key account as necessary within and beyond
the sales organization; and provide continuity even if changes to the rest
of the key account team are necessary. Leaders must monitor the firms
progress toward achieving the strategic objectives, such that they become
members of the selling center as the executive sponsor. For example, IBM
assigns a senior executive as a managing director (MD) responsible for
the success of key accounts; senior managers who lack experience as key
account MDs have incomplete resumes in IBMs corporate culture. The
position is not a sales role, because MDs spend little time supporting
sales opportunities, and the majority of MDs are not sales executives.
Rather, their responsibility is to manage the relationship, especially at the
executive-to-executive level, and understand the key accounts business
and strategy. Our concept of the selling center is consistent with this vision of a consistent, long-term executive relationship that is not focused
on specific sales opportunities.
The Key Account Executive is a leader who is part of every key account
selling center to take responsibility for the success of the key account
strategy and organization. The key account executive can be vice president of key accounts, or a vertical market executive who manages several
key account managers. At Xerox, key account executives have responsibility of vertical markets (e.g., automotive, aeronautic, telecommunication, construction, energy, public institutions) and support teams of key
account managers insuring the consistency of the key account program
within specific industries. The key account executive stewards the strategy
and is accountable for the success of the entire program. Thus, he or she
should be part of the senior executive team, reporting directly to the chief
operating officer or president.
The Key Account Manager (KAM) is the next and obvious member of
the selling center. KAMs in many Fortune 100 companies hold directorlevel positions, with titles such as account vice president, global account
vice president, and global account director. Such titles make it clear this
position has an important role in the company. Beyond the obvious
27
responsibility to achieve specific revenue or profit objectives, the KAM

must be their customers advocate within their supplier organization. One
highly successful KAM explained it this way: I work 51 percent for my
company and 49 percent for my customer. Another cites, as one of his longterm goals, being appointed to the board of directors for the customer
organization, not his employing company. As a leader, a KAM is never
a sole contributor. Because he or she needs leadership and management
skills, the best salesperson often does not make the best KAM.
It is beyond the scope of this book to discuss all the competencies and
traits that define a successful KAM; various competency models are available in academic literature and from consultants. However, we believe
that strong negotiation abilities, interpersonal intelligence (people smart),
leadership skills, integrity, loyalty, and drive are key dispositions. Business
acumen, attention to detail, planning skills, and sales process knowledge
also are critical competencies. One of the most important competencies
for a KAM is building allies and networks. KAMs are responsible for tens
of millions, in some cases billions, of dollars in revenue. But they have
very few people reporting to them. They depend on their network and the
ability to manage with influence, not authority.
Before leaving this discussion, we also consider the question of the
ideal number of accounts for which a KAM should be responsible. The
answer is simple: One (ideally). By one account we mean a single client, although we recognize that such clients relevant business units or
subsidiaries may belong to the same account and KAM from the suppliers perspective. Consider the financial case: Using the 80/20 rule,
assume that 25 accounts make up 25 percent of your revenue, or 50
accounts make up 50 percent of your revenue, so each key account averages 1 percent of your revenue. The objectives for implementing a key
account strategy are to retain these accounts and grow them faster than
non-key accounts. It is thus both reasonable and profitable to devote
a full-time, responsible manager to this important effort. We can also
make an organizational case: Key accounts are large, complex organizations that engage in a lot of different activities in various places. The
more a KAM knows about an account, the more successful that KAM
will be. Diffusing her or his effort to more than one account almost invariably reduces the depth of knowledge. Finally, KAMs are valuable to
28
customers because of the combination of their account knowledge and

their industry knowledge. If a KAM has more than one account, those
accounts are very likely to be competitors in the same industrynot
an appealing prospect for the key accounts. One senior executive once
told us that a company needed to replace its KAM solely because this
KAM also maintained a competitors account. Thus, ideally, a KAM has
one account, supported by a team of members of the selling center who
interact with the key account regularly.
However, this ideal approach is often not possible or realistic, because
good KAMs are expensive and hard to find. Therefore, we more realistically recommend that each KAM should be responsible for as few key
accounts as possible, with an upper limit at five. Any more than five key
accounts, and they are no longer being treated as key accounts.
Thus, the selling center for each key account contains a key account
sponsor and a KAM. Before detailing the roles of the other members,
we note that key accounts not only are unique but also must be treated
uniquely, which implies the need for a specific constitution of each selling
center, to include the particular members and roles that are consistent
with the way the account wants to be managed. Remember: Its always
about the customer.
The KAM needs a team, the execution members of the selling center.
The leaders and contributors that are the frontline who will interact with
the key account every day.
Leaders. Leaders have two major responsibilities. First, they must understand the needs of the key account in their respective area of expertise.
Second, they must use that understanding to identify and assign the best
available supplier resources, including contributors, to meet those needs.
Why do we call them leaders? Often these critical members of the selling
center do not manage any direct reports, but they do have a tremendous
responsibility to retain and grow the key account in their segment of the
relationship. They must accomplish this by leading others in their segment of the business using influence and respect versus authority. They
have specific in-depth knowledge of their subset of the account and of
the relevant supplier offerings or processes. Leaders may be permanent
29
members of the selling center, or temporary. They may be assigned to one

key account, or multiple accounts. They may be assigned full time to the
key account program, or part time.
Subject Matter Leaders have in-depth knowledge about a subset or segment of the suppliers offerings. They have intimate knowledge of how the
key account can best use those supplier offerings, and they know the contacts in the key account that are the most knowledgeable and supportive
users of their product segment. They also know other experts in the suppliers organization that can supplement their knowledge when necessary
to support the key account, either because of depth of product knowledge
or for geographic alignment with the customer. While the KAM focuses
on account relationships, business acumen, knowledge of the account,
sales opportunities and customer satisfaction, the subject matter leader
focuses on technology, product knowledge, and how to use the suppliers
products and services to solve customer problems and address needs, as
described in Chapter 2. A critical part of this role is connecting the appropriate technical resources from the key account with their counterpart
at the supplier. In many industries a subject matter leader is the most
common fourth permanent member of the selling center and the most
valuable internal resource for the KAM.
Geographic Leaders are necessary when both organizations have autonomous geographic business units. They represent the selling center
in a geographic location where the key account operates. They are intimately aware of the customers local operation and the key contacts in
that location. They know how and where the suppliers offerings are being
used in their geographic region. They are the most geographically dispersed members of the selling center. Their day-to-day personal contact is
with the local supplier organization and the local customer organization.
Collaboration using CRM as described in Chapter 3 is critical for these
leaders to stay aware of their key account activity and the selling centers
strategies and tactics.
Supply Chain Leaders are important if suppliers and the KAM have
critical high volume logistics issues. This role supports the operational
fit of the two organizations. In many industries on-time delivery of the
right product at the right place with the right quality is the most important supplier evaluation criteria to a key account customer. Todays supply
30
chains are complex and time critical. As we will discuss in Chapter 3,

integration of the key account and suppliers supply chains is often an
opportunity for synergy and significant value added for the relationship.
All this is the responsibility of the supply chain leader.
Administrative Leaders take care of all administrative processes that
occur when managing large customers. It is entirely possible that the supplier organization has superb administrative systems and all customers
find the organization administratively easy to do business with. This is
rare. For key accounts an investment in an administrative leader to make
sure the customers administrative processes are performed efficiently
has a direct positive impact on customer satisfaction. The administrative
leader also looks for ways to integrate administrative processes between
the two organizations. Similar to the Grainger example above, these integration opportunities increase the barriers to competition and reduce cost
in both organizations.
Contributors. Contributors are temporary members of the selling center.
They join when there is an opportunity or a need that requires their participation. This can be because of their function, expertise, or location. It
is driven by a KAMP as described in Chapter 2. They are critical members
of the selling center. Large complex, dispersed key accounts cannot be supported by the KAM and the selling center leaders only. In every case, some
number of contributors from the rest of the supplier organization provides
the vital feet on the street to insure a successful key account relationship.
Contributors are enlisted to join the selling center by one of the leaders.
Thats why leaders must have intimate knowledge of the people in the
organization and the ability to manage with influence to enlist the right
contributors to support the key account. Contributors will join the selling
center from every function and role in the company. A human resources
expert may be needed to help find and recruit internally or externally a
specific expertise for a concern or expectation in KAMP. A member of the
General Counsels office might be added as a contributor to the selling center to help support the intellectual property negotiations for a co-created
innovation. A frontline sales representative might be enlisted to develop a
relationship with buying center users or influencers in a geographic location without a geographic leader to support an opportunity management
31
in KAMP. These sales contributors must quickly gain the account knowledge necessary to effectively represent their product to the key account.
Collaboration using CRM as discussed in Chapter 3 is critical. They have a
direct reporting relationship to a product or regional sales manager, and an
indirect reporting relationship to the key account selling center geographic
or subject matter leader. An employee that provides a service or otherwise
supports customers might become a selling center contributor to help deliver or support a specific product or service. This type of contributor is in
a role that is often the largest part of the supplier organization, customer
service and support. We know an oil field service company with 175 key
account team members, 3,200 sales people, and over 75,000 service and
support people. What this means is that every day many of these contributors are engaging with the selling centers key account. They are also probably working at other accounts. But when any contributor is supporting a
key account they are members of the selling center. They should be aware
of any account issues, and regularly communicate the service and support
activity at the key account to the relevant leader. They can be engaged in
any of the KAMP dimensions described in Chapter 2. The eight selling
center roles are summarized in Figure 1.4.
Members
Role
Key Account Sponsors
Insure Executive to Executive relationship between supplier and

key account
Key Account Executives
Lead, manage and support the suppliers key account program
Key Account Managers
Retain, grow the relationship between the supplier and 1 to 5 key

accounts, align relationships, sales process, communication between
the supplier and the key account
Subject Matter Leaders
Represent specific supplier offerings to the key account, insure the

successful use of this leaders segment
Geographic Leaders
Represent the selling center in a geographic location where the key

account operates
Supply Chain Leaders
Insure the on-time delivery of the right product at the right

place with the right quality, identify supply chain integration
opportunities
Administrative Leaders
Insure the efficient performance of the customers administrative

processes, identify ways to integrate the administrative processes
between the two organizations
Contributors
Support a specific Key Account Management Process (KAMP) for

the selling center
Figure 1.4 Selling Center Members and Roles
32
Organizing the Selling Center and Driving the Selling Center

Alignment Process: The SCAP
We know every customer is unique, but key accounts are unique and
must be treated uniquely. That includes the make-up of the selling center,
those people that will deal with the key account every day. A key accounts
selling center must have those members and roles that are consistent with
the way the account wants to be managed. We just described eight selling
center roles. Three of these are consistent among every key account: the
executive sponsor, executives responsible for all key accounts, and KAMs.
Whether any one key account has the other five roles in the selling center,
and how many of each, depends on (1) where the account is on the continuum of key account relationships described below, (2) the accounts
organizational structure, how can we maximize organizational fit, and (3)
the grow potential as described in the Open Space analysis. These same
three factors also determine if the members of the selling center are permanent or temporary.
From a Continuum of Key Account Relationships
to Critical Success Factors
Although people often prefer to think in dichotomies or triads, the relationship between a customer and a supplier is a continuum. This continuum ranges from a car owner whose battery dies in the middle of the
desert and the local garage that replaces it never to see that customer again
to 3Ms ongoing collaboration with P&G, in which the two Fortune 100
companies innovate together to keep improving the design and reducing
the cost of Pampers diapers.
But to reflect traditional modes of human thinking, many key account
models use sets of three. In Key Account Management and Planning23 Noel
Capon describes three steps along a continuum: vendor, quality supplier,
and partnership. In Rethinking the Sales Force24 Neil Rackham identifies
three types of customersupplier relationships: transactional, consultative, and enterprise. Johnston and Marshall, in the 10th edition of their
Sales Force Management25 book, list the three levels as market exchange,
functional relationship, and strategic partnership. For Senn, Thoma,
and Yip, in Customer-Centric Leadership,26 there are three customer asset
33
management perspectives: sales, relationship, and network. In all these

cases, and others in the literature, the relationship progression describes
an increasingly closer, deeper connection, with broader value for both
companies as they move up the continuum. For example, the explicit
involvement of both parties in product innovation (value co-creation) is
not part of the first relationship level but is desirable in the third.
However, for our purposes, a critical distinction is required: A key
account program should not focus only on the top tier of relationships.
Rather, a key account program must be flexible enough to accommodate
key accounts that fit any of the categories and appear anywhere on the relationship continuum. Consider, for example, the unique situations that
Landmark Graphics recognized and applied for two of its key accounts,
Exxon and Chevron, as detailed below:
ExxonMobil and Chevron were both key account customers of
Halliburtons Landmark Graphics software division when one
of us was the sales vice president responsible for these accounts.
Landmark developed product innovations specifically for each
customer, but the customersupplier relationships represented
different ends of a continuum.
ExxonMobil had a specific need for a complex application that
would enable it to analyze information gathered below the earths
surface and support one of its geoscientific disciplines. On its
own, ExxonMobil developed application criteria and a request for
proposal (RFP), then sent the RFP to three companies it believed
were capable of developing that application. After receiving submissions, it asked for presentations and demonstrations from all
three suppliers, then formally entered negotiations with two of
them and finally selected Landmark. This process took 20 months.
Following the selection, ExxonMobil monitored milestones in the
development process and issued progress payments, as established
previously in the negotiation. It also limited its interactions with
Landmark to two people: the account manager and the development project manager, both of whom interfaced with their counterparts at ExxonMobil (i.e., procurement manager and technical
34
manager). At the completion of the applications development,

Landmark delivered the software licenses to ExxonMobil, according to a predetermined schedule that was based on ExxonMobils
available installation and training resources. The development
took 12 months; the total deployment took another 18 months.
Chevron had a similar need but for a different geoscientific discipline. A joint team of geoscientists from Chevrons E&P Technology group and Landmarks Chevron Global Account Team
identified a potential enhancement to an existing Landmark
product that would significantly increase the quality of subsurface
analyses for a specific type of geology; it would offer a more accurate prediction of the amount of oil and gas in an area, resulting in more accurate asset valuation and revenue predictions. The
team agreed on a set of development criteria and collaboratively
built a return on investment analysis for the projected product.
This analysis accounted for the potential that Landmark could
sell the enhanced product to other exploration and production
companies. The team further agreed on Chevrons investment
and set a development, implementation, and training schedule.
Landmark developed the product, with regular consultations with
Chevron experts to define the complex algorithms and workflows.
Following the new release, a joint team installed and trained users.
The total time for this co-created process with Chevron was about
20months.
In the highly oligopolistic oil and gas industry, both ExxonMobil
and Chevron are, and probably always will be, critical strategic
accounts for Halliburton and its Landmark division. The conventional wisdom thus would suggest managing these accounts with
similar sets of resources, strategies, and organizational approaches.
In other words, if they are key accounts, the supplier should invest
in them according to the assumption that they reflect the high end
of a relationship continuum. But as this example shows, managing
key accounts and creating an effective selling center is never a one
size fits all exercise.
35
Both projects were profitable for Landmark, but only because

Landmark treated each customer the way it wanted to be treated
and invested in the relationship only to the extent that it could
earn some payback. From its prior knowledge, Landmark knew
that ExxonMobil wanted to be managed as a transactional account, so it did not assign a large global team that would report
to a global account manager. Nor did it assign technical experts to
the account for each relevant geoscience disciplines. Yet it made
both these investments, among others, for Chevron. This distinction is in no way a value judgment: Chevrons co-creation strategy
is not better or worse than ExxonMobils. No one who knows
the oil and gas industry can realistically question either companys
ability to execute and succeed.
Before reducing the list of target key accounts to the final few and
finalizing the constitution of the selling center for each key account, the
supplier needs to return to its Open Space analysis (Figure 1.1). This
analysis process can be refined to offer a powerful method for identifying
where, who, and how much to invest in a key account.
The primary strategic key account objectives are retaining and growing key accounts faster and more consistently, as well as co-creating new
solutions in partnership with those key accounts to improve everyones
performance. Thus, we first need to ask our KAM to get to know the account. The KAM should identify no less than two and no more than five
critical success factors (CSFs) or strategic initiatives for this accountan
effort that requires substantial depth of knowledge about the account, the
industry, and the personal goals of the key accounts executives. However,
it does not require any knowledge about the supplier.
Armed with these CSFs, we return to the Open Space analysis (see
Figure 1.1 and 1.2). The original Open Space analysis (Figure 1.1) is similar to one used by many suppliers especially in the information technology industry (also called White Space). In it we identified regions and
business segments in which the supplier was not providing sufficient
products or services. By adding key customer strategies (CSFs) and competitive positioning we also find the intersections at which the supplier
36
can provide greater business value by helping the key account achieve its
business imperatives (Figure 1.2). This analysis is a critical planning tool
for a key account team. With it we can identify:
Which target accounts to make key accounts. If we cannot
help the account achieve what matters to it, we might cross
that customer off the list.
The necessary members of the selling center. We want people
whose expertise can help us promote products and services
that really matter to our customer.
The specific criteria that will define success.
Potential co-creation innovations that reflect our current
portfolio and also can support the customers initiatives.
Push solutions for the KAMP processes (Chapter 2).
Undeveloped and desirable accounts (Chapter 4).
To determine the success of each key account and the KAMs program
overall, we set goals associated with three main objectives: (i) financial
growth at a rate greater than that achieved by the rest of the company,
(ii) increased sales of products and services not previously sold to the key
account, and (iii) new product innovation in collaboration with the key
account. The specific levels for each of these goals should reflect the information gleaned from the extended Open Space analysis.
We have identified appropriate key accounts and staffed the selling
center but the process is not over. The plans and strategies adopted by the
key account change constantly, as do the suppliers products and services.
Therefore, on a regular basis (usually quarterly), the KAM must review
the key account selection criteria, the accounts CSFs, the accounts position on the relationship continuum, and the Open Space analysis. If
these factors do not change, it means the team is not as engaged with the
key account as it should be. Change represents a golden opportunity to
increase the value of the supplier to the key account.
Now we will more fully explain the selling centers functions and
how the members interact with each other. We will provide guidance
and structure so that the KAM can provide clear alignment, leadership
direction and support to the other members of the selling center. Since
37
the selling center is a network of stakeholders connected to a key account

that might have a say in the course of an organizations selling process and
strategy, we can develop a relevant framework to guide KAMs in providing direction to selling center members to achieve their mutual objectives. We
call this framework the Selling Center Alignment Process (SCAP).
The SCAP
The SCAP relies on three interrelated processes that direct and support
the selling centers efforts to serve, manage, and grow the suppliers relationship with the key account (see Figure 1.5).
1. Interface Alignment: The process of aligning the supplier and customer functions necessary to achieve the key account teams goals.
2. Connections Alignment: The process of aligning the individuals from
the supplier and the customer that are necessary to achieve the key
account teams goals.
3. Sales Process Alignment: The process of aligning all necessary resources
within the suppliers organization at the right time, in the right place
to successfully execute a key account sales process.
Figure 1.5 SCAP Components
38
These three alignment processes are interrelated elements. All of them

are occurring all the time. At any given point in time the selling center
is engaged in multiple key account opportunities each with its own sales
process at some stage of execution. Each opportunity could have its own
selling center members with the permanent selling center leaders and temporary contributors making team alignment challenging. As we will learn
in Chapter 2, multiple buying center expectations and concerns must be
managed all the time making the alignment of one on one connections and
supplierkey account interfaces time consuming and difficult. Clearly, it
is a challenge to simultaneously monitor, control where necessary, and
direct these three processesfurther evidence of the complexity of the
KAMs role. We will now focus on each of these alignment functions
within the SCAP to provide the selling center and, specifically, the KAM
with a framework to correctly align the supplier organization with the
key account.
Interface Alignment. One of the authors has had two diametrically opposed interface alignment experiences. He lost a very significant sales
opportunity with a key account because, according to the CIO, the supplier was too hard to do business with. He won the second opportunity
with a different key account years later because, according to the Director
of Operations, the authors business processes were more closely aligned
with the accounts processes than his competitors. Being easy to do business with is another responsibility of a key account team, and another responsibility that is often not within the account teams ability to control.
Interface alignment is the process of aligning the supplier and customer functions necessary to achieve the key account teams goals. Many
of these functions are critical to being easy to do business with. Supply
chain processes such as shipping and receiving, managing specifications,
managing returns, service delivery, and confirmation and production
forecasts should be aligned between the buyer and seller. They all have
an impact on whether the key account sees the supplier as responsive,
or not. The suppliers accounting and administrative processes also must
be aligned with the reciprocal customer processes. Examples of these are
order processing and invoicing and payables. More obvious functions in
39
a key account context are procurements alignment with sales, suppliers

pre-sales processes aligned with the buyers request for proposal function
and suppliers implementation or post-sales support aligned with the buyers user community.
When these processes, and many others, are aligned between the
buyer and seller the relationship works and opportunities to increase the
value of the relationship at the boundary between the organizations are
identified. See the discussion of this topic in Chapter 3. The corollary is
that if the alignment is not effective, the relationship between the key
account and the supplier is difficult, often contentious and short lived.
The key account team is responsible for identifying interface alignment
issues and opportunities. In most key account programs this responsibility is not explicit. It should be. There is usually plenty of evidence when
the two organizations are not working well together, but there is often no
clear mechanism to address the issues. That is why the SCAP includes a
formal recognition of interface alignment.
Connections Alignment. People work with people they know, like, and
trust. The SCAP connection alignment process identifies the people from
the supplier that are in the right location and/or business segment and
provide the ideal expertise, skill, and attitude to support the key account.
More than just being aware of the network of people that need to interact,
it also involves making those people work together. For the supplier, the
KAMs selects permanent members of the selling centerleadersand
temporary memberscontributors. Temporary members are identified
for a specific KAMP as described in Chapter 2.
The KAMs SCAP connections alignment responsibility means constantly looking for the right people to support the account. Again, in
the complex world of key account management there is always a new
opportunity to pursue or problem to solve. Equally important, the KAM
works with the facilitator in the key account buying center, as described in
Chapter 2, to identify key account employees that will work with members of the selling center to enhance the mutual value of the relationship.
Finding and selecting these people, from the supplier and the key
account, is a challenging and constant task. Not only does it require
40
extensive knowledge of the best people in both organizations, it also requires an ability to manage with influence, not authority. The KAM rarely
has the authority to select and then manage the members of the selling
center. Of course, he or she cannot choose the key accounts employees
that will be members of the buying center. Even so, connecting the right
people from both organizations is a critical alignment function of the key
account team.
Looking at connections alignment in greater detail, it is the KAMs
responsibility to:
Select the right leaders to manage the teams strategies, tactics,
and opportunities.
Identify the key accounts senior executives that are important
to the success of the supplier in the account.
Leverage the account sponsor or executive or other supplier
executives to reach out to.
Create an engagement plan for each of the identified key
account executives to create the relationship or enhance an
existing one.
With the buying center leadership, establish regular
executive to executive account reviews to monitor progress
of the relationship based on the goals and objectives
established above.
Identify other key account contacts that will be facilitators,
influencers, or decision makers (see Chapter 2).
Connect specific members of the selling center to these
relationships.
Make those people understand each other and work
together whenever necessary.
Connections alignment is thinking beyond the day-to-day responses
to sales opportunities and other active projects. It is strategically thinking about the health of the relationship between the supplier and the key
account. It is about creating individual relationships that will foster a
long-term partnership and that will support that partnership during the
inevitable problems and issues that occur.
41
Choosing the permanent leaders is the most important function of

SCAP connections alignment. The KAM should consider the following:
Needs of the key account
Is supply chain performance critical?
What product or service domain expertise is currently
needed?
Are administrative processes difficult? Is the volume of
transactions significant?
Where are the accounts locations? How autonomous are
these locations?
Needed expertise
Expertise in the required subject matter
Anticipated expertise needed based on Open Space analysis,
KAMP opportunities, or problems to be addressed
Knowledge of the key account
Tenure with the supplier
Tenure with the key account
The importance of connections alignment cannot be overstated. In
choosing selling center members the KAM is creating one-on-one connections between the key account and the supplier. These connections are the
strength of the overall relationship between the key account and the supplier.
Sales Process Alignment. The potential sale of a product or service to
a key account is a very valuable opportunity. To take advantage of these
opportunities the key account team must align the supplier organization
with the sales process. This alignment is about timing and resources. A
simple example clearly points this out. Often when the buying center is
selecting the supplier (negotiating), an expert from the suppliers legal
department is required. If this expertise is not available at the right time
in the selling process an opportunity is missed and the sale is delayed or
even lostthe competitor might be better aligned. We discuss the buying
process and the sales process in detail in Chapter 2, but brief examples of
the resources the selling center might require at the different stages of the
sales process illustrates the importance and complexity of this alignment.
42
Sales & Buying Process Step
Supplier Resource
Need Recognition
KAM, Pre-Sales Analyst
Characteristic Determination
KAM, Product Marketing
Specification Establishment
KAM, Supply Chain Expert
Potential Source Identification
KAM, Marketing
Proposal Requests
KAM, Marketing, Finance
Proposal Evaluation
KAM, Legal Expertise
Supplier Selection
KAM, Executive Support
Post-Purchase Evaluation
KAM, Service Delivery
Figure 1.6 Sales Process Alignment Examples
The appropriate supplier resources must be available at the right time

to support each step of a successful sales process. Each example of the
necessary expertise in Figure 1.6 is just one such resource for each step.
Magnify this complexity by including business segment or geographic
specific requirementsit is common that many of the sales process steps
take place in multiple key account locations. In addition to aligning the
appropriate people with the sales process, the selling center must insure
other resources such as trial products, promotional material and demonstration equipment are also available when necessary for every sales opportunity that is in process at any point in time. Note that the sales process
presented here are more common milestones KAM needs to address along
with aligned resources, rather than a rigid process to follow. As we will see
in Chapter 2, the KAMP process gives a better idea and understanding of
what the selling process to large customers is about.
One other key resource must be available at every step of the sales
processa CRM system that is used to document sales process activity.
CRM is discussed in detail in Chapter 3. But for successful sales process
alignment every member of the selling center must share and access information about the key account to communicate and work together.
A CRM system facilitates this collaboration and supports access to the
entirety of information about each sales opportunity. Use of a CRM system is how the KAM knows what resources are necessary and when the
sales process step requiring that resource will take place. The KAM along
with the administrative leader is responsible for making this happen, easily and all the time. Therefore it is critical that the KAM uses the system
43
constantly and model collaboration and information sharing actions. The

other members of the permanent selling center must do the same.
The SCAP focuses the key account team on interface alignment,
connection alignment, and sales process alignment; three processes that
must be in place and constantly monitored to support a valuable key
accountsupplier relationship and a successful KAMP. The SCAP is important because in case of issues or failures when selling to large customers, the KAM would first need to review which dimensions of the three
SCAPinterface alignment, connection alignment, and sales process
alignmentlacked alignment. Such review also will have to be analyzed
in regard to the KAMP that we address in Chapter 2.
Chapter 1: Summary and Key Points

1. Key account management is a specific business strategy that involves
complex sales processes, large-scale negotiations, and the alignment
of multiple internal and external stakeholders.
2. The decision to implement a key account program stems from two
separate conclusions by the supplier: Some customers are more important than others, and the suppliers organization must change to support
and enhance these critical accounts, rather than risk losing them.
3. Three management concepts support the key account decision: Customer lifetime value (CLV), defined as the expected revenue earned
from a customer over the life of the relationship, less the cost of that
relationship. Unrealized Potential Value (UPV), or the amount the
sales organization could increase the value of a particular customer
if it applied a strategy to do so. The Pareto principle (80/20 rule),
according to which disproportionate shares of revenue and profits
come from a few large customers.
4. Using the CLV, UPV, and 80/20 rule, suppliers should identify and
rank the customers that represent the best prospect for achieving
great results. By considering their potential value, the case for key
accounts becomes obvious.
5. A two-pronged approach to managing customer relationships frames
the objectives of a key account strategy: Retain existing accounts.
Losing even one key account can have measurable negative financial
44
impacts. Grow key accounts. It is far easier to increase revenue among

existing accounts than finding and selling to new ones.
6. Six criteria should inform the development of a list of target key
accounts: Size, strategic importance, CLV, UPV, account fit, and
relationship method.
7. The selling center is a network of stakeholders connected to a key
account that might have a say in the course of a suppliers selling
process and strategy. Permanent members always have a say and
a vested interest; temporary member sometimes have a say and a
vested interest.
8. Membership in the selling center should be defined according to
three key accountspecific factors: How the account wants to be
managed, which reflects its position on the continuum of customer
relationships from transactional to strategic. The suppliers operational ability to support the key account, as determined by operational fit. The opportunity to grow through critical factor of success,
as measured by UPV through an Open Space analysis.
9. A selling center features eight possible roles. The permanent roles
that support every account are key account sponsor, the key account
executive, and the KAM. Five other roles might be appropriate,
depending on the key account, and can be either permanent or temporary: one or more subject matter leaders, one or more geographic
leader, the supply chain leaders, the administrative leaders, and one
or more contributors.
10. The Selling Center Alignment Process (SCAP) is a framework to
guide KAMs in providing direction to selling center members to
achieve their mutual objectives. The three alignment processes in
SCAP are interface alignment, connections alignment, and sales process alignment.
Index
Accessibility, 95
Account concentration, increasing, 3
Account fit, 2022
Administrative leaders, 30
Advisors, 5051, 52, 82
criteria and needs, identifying, 125
Affordable Care Act, 81
Alarm system, 65
Amazon, 102
Apple, 5, 6
Back-to-business (B2B) relationships,
2, 3, 6, 10, 12, 13, 23
Back-to-consumer (B2C)
relationships, 23
BP, 5
Bridgestone, 19
Buyers, 4647, 52, 7779
criteria and needs, identifying,
124125
Buyerseller diamond connections
consultative connections, 86
transactional connections, 8586
transformative connections, 8687
Buyerseller fit, 7273
Buying centers
coaching, 6970
decision-making process, 4748
defined, 4546
members criteria and needs,
identifying, 123129
criterion importance, assessment
of, 125126
gauge vulnerability, 128129
offers and solution, 126128
tangible and intangible decisionmaking criteria, 123125
members, roles of, 4647, 52
to relational state, moving, 7687
situational state of, diagnosing,
7576
stages and behavior of, 4849
CABS leads qualifying checkpoints,

6667
Chevron, 4, 5, 3335, 103
Choices management, 6869
Coaching
developmental, 135
difficulties during sales process,
avoiding, 136137
large customers, 135137
Coca Cola, 110
Collaboration, 9495
Complex sales, 62, 63, 64, 67, 74
Concerns management, 6466
Connections alignment, 3941
Contributors, 3031
Core transactional measures, 72
Critical success factors (CSFs), 35, 36
Cross selling, 8
Cultural fit, 21
Culture, defined, 21
Customer lifetime value (CLV), 8, 9, 20
Customer relationship management
(CRM)
accounts health, 101102
building blocks of, 108109
Collaboration, Accessibility,
Readiness (CAR) triangle,
9497
collaborative technology, 8994
infusion of, 109
push opportunities, 9798
routinization of, 109
sales opportunities, 98101
successful for selling center, making,
108110
Customers
gaining, 1213
growing, 1317
large, leading and coaching,
135137
loyalty, 2324
profitability, 2324
152 INDEX
retaining, 13
value, defined, 123
Deciders, 47, 52, 8384
Dell, 5, 6, 102
Developmental coaching, 135
eBay, 102
Ecolab, 19
80/20 rule. See Pareto principle
Engineering
value creation by technology,
105106
Expectations management, 6364
ExxonMobil, 5, 21, 22, 3335, 103
Facilitators, 51, 52, 82
Financial systems integration
value creation by technology, 105
Firestone, 19
Gatekeepers, 47, 52, 7677
GE Finance, 110
General Motors, 4
Geographic leaders, 29
Good buddy, 83
Google, 19
Grainger, 6, 30, 102
Halliburton, 104
Hilton, 19
Honeywell, 110
IBM, 6, 26
Influencers, 47, 52, 82
Information awareness, 98
Information providers, 8283
Infusion, 109
Inner salesperson, 83
Interface alignment, 3839
Key account customer value
defined, 7071
expectations and attributes of,
7174
Key account executive, 26

Key account management (KAM)
defined, 1
developing and growing,
132134
difficulties associated with
managing, 117118
effectiveness, defined, 1
historical trends of, 27
strategic importance of, 116117
strategy, case for, 1011
technology, expanded use of, 5
Key Account Management Process
(KAMP)
choices management, 6869
components of, 60
concerns management, 6466
customer portfolio, 5558
expectations management, 6364
opportunities management, 6668
project management, 6163
as strategic reflection, 5355, 80
as tactical execution, 5860
Key account managers, 2628
Key accounts, criteria for identifying
account fit, 2022
customer lifetime value, 20
relationship method, 2224
size of, 1819
strategic importance of, 19
unrealized potential value, 20
Key account sponsor, 26
Landmark Graphics, 3335,
103, 104
Large customers, leading and
coaching, 135137
Law of the Vital Few. See Pareto
principle
Leaders, 2830
administrative, 30
geographic, 29
subject matter, 29
supply chain, 2930
Managing director, 26
Microsoft, 6
Motorola, 4
INDEX
153
Net present value (NPV), 8

Nippon Steel, 19
Open Space analysis, 1417, 3536,
9798, 122
Operational fit, 21
Opportunities management, 6668
Pareto principle, 910
Perceived risk, 49
Portfolio analysis, 115122
Potential profit contribution, 119, 120
Power zones, 75
Present profit contribution, 119, 120
Process measures, 72
Proctor and Gamble (P&G), 5
collaboration with 3M, 32
collaboration with Wal-Mart, 6, 13
Procurement process
changes in, 45
rising importance of, 34
Product development
value creation by technology,
105106
Project
control, 6263
execution, 62
initiation, 61
management, 6163
objectives, 61
planning, 6162
Push opportunities, 9798, 106
Readiness, 9596
Receptiveness zones, 75
Relationship method, 2224
Request for information (RFI), 6
Request for proposal (RFP), 6, 33
Role ambiguity, 49
Role conflict, 49
Routinization, 109
Salesforce.com, 23, 90, 110
Sales opportunities, 98101
Sales process alignment, 4143
Secure the Customer Kingdom
(SCK), 162, 163
Sellerbuyer relationships, 5
Selling center
building, 2443
CRM successful for, making,
108110
members and roles
contributors, 3031
leaders, 2830
senior management, 2528
organization of, 3237
Selling Center Alignment Process
(SCAP), 3743, 84, 95, 110,
135
connections alignment, 3941
interface alignment, 3839
sales process alignment, 4143
Senior management, 2528
Service measures, 72
Shell, 21
Siemens, 74
Southwest Airlines, 5
Strategic fit, 21
Subject matter leaders, 29
Supply chain integration
value creation by technology, 105
Supply chain leaders, 2930
Supply chain process
changes in, 45
Sysco Foods, 19
Technology
collaborative, 8994
to create value at boundary,
102105
engineering, 105106
financial systems integration, 105
for key account management,
expanded use of, 5
product development, 105106
supply chain integration, 105
value co-creation, 105106
Texaco, 22
Threat zones, 75
3M
collaboration with P&G, 32
Unrealized potential value (UPV),
89, 14, 20, 131
Up-selling, 8
154 INDEX
Users, 46, 52
implied and explicit needs, 7980
problems, identification and
assessment of, 79
US Steel, 19
buying center to relational state,

moving, 7687
situational state of buying center,
diagnosing, 7576
Value proposition competitive
checklist, 129131
Value co-creation, 9, 105106

Value, defined, 70
Value delivery
key accounts for, diagnosing,
7476
Wal-Mart, 5
collaboration with P&G, 6, 13
Westin, 19
Whirlpool, 19
Wuhan Steel, 19
OTHER TITLES IN OUR SELLING AND SALES FORCE

MANAGEMENT COLLECTION
Buddy LaForge, University of Louisville and Thomas Ingram,
Colorado State University, Collection Editors
Sales Technology: Making the Most of Your Investment by Nikolaos Panagopoulos
Effective Sales Force Automation and Customer Relationship Management: A Focus on
Selection and Implementation by Raj Agnihotri and Adam Rapp
Customer-Oriented Sales Management Practices: Text and Cases by Ramendra Singh
Sales Force Ethical Decision Making: A Guide for Sales Professionals by Lawrence
Chonko and Fernando Jaramillo
Competitive Intelligence and the Sales Force: How to Gain Market Leadership Through
Competitive Intelligence by Jol Le Bon
Lean Applications in Sales: How a Sales Manager Applied Lean Tools to Sales
Processes and Exceeded His Goals by Jaideep Motwani and Rob Ptacek
Improving Sales and Marketing Collaboration: A Step-by-Step Guide by Avinash
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Entrepreneurial Selling by Vincent Onyemah
Selling: The New Norm: Dynamic New Methods For a Competitive and Changing
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Strategic and Entrepreneurial Sales Management For Sales Leaders: Leading the
Sales Force For Higher Market Shares and Profits by Jol Le Bon
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Key Account Management

Key Account Management

Key Account Management: Strategies to Leverage Information,

To my wife Caroline and our globetrotters

maintain and grow market leadership through key account managers

to identify them, and how to create teams to manage them. We introduce

Key Account Management,

Setting up a key account program and strategy requires a careful analysis

From Treating All Customers Alike

KEY ACCOUNT MANAGEMENT

strategy involving complex sales processes, large-scale negotiations, and

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

rising importance of procurement, and (iii) changes in the supply chain

KEY ACCOUNT MANAGEMENT

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

1. Supply chain integration

One of the most important technology innovations of the last few

KEY ACCOUNT MANAGEMENT

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

KEY ACCOUNT MANAGEMENT

We introduce these three concepts here as further justification for

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

business segments or geographic markets. Co-creation is collaborating with

KEY ACCOUNT MANAGEMENT

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

reached at the 19th customer on their list of 2,700 customers. Customer

KEY ACCOUNT MANAGEMENT

Unprofitable or undesirable customers must not be part of a key account

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

KEY ACCOUNT MANAGEMENT

2. Increasing sales of more expensive and more profitable products and

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

Figure 1.1 Simple Open Space Analysis

KEY ACCOUNT MANAGEMENT

Figure 1.2 Enhanced Open Space Analysis

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

The analysis provides a valuable perspective on how suppliers may

Implementing Key Account Management

KEY ACCOUNT MANAGEMENT

Only after understanding and applying these criteria, researching each

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

KEY ACCOUNT MANAGEMENT

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

KEY ACCOUNT MANAGEMENT

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

customers with a negative contribution margin (revenue less direct cost

Figure 1.3 Customer Loyalty and Profitability

KEY ACCOUNT MANAGEMENT

respective quadrants in large part because of their chosen relationship

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

buyerseller relationships during the purchase process. The resulting sales

KEY ACCOUNT MANAGEMENT

must be managed differently and (ii) the organization must change to

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

responsibility to achieve specific revenue or profit objectives, the KAM

KEY ACCOUNT MANAGEMENT

customers because of the combination of their account knowledge and

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT

members of the selling center, or temporary. They may be assigned to one

KEY ACCOUNT MANAGEMENT

chains are complex and time critical. As we will discuss in Chapter 3,

KEY ACCOUNT MANAGEMENT, ORGANIZATIONAL ALIGNMENT